AbCap Offers Investors Concessions, Reopens German Fund

Oct 25 2007 | 11:05am ET

Troubled hedge fund Absolute Capital Management dodged another bullet yesterday, making a series of concessions to a group of unhappy investors in an effort in ensure approval of its restructuring plan this weekend.

AbCap said three independent private equity and valuation experts would produce a report on the status of its illiquid holdings. The firm suspended withdrawals from its seven funds last month after the abrupt resignation of founder Florian Homm, who had invested a portion of the funds’ assets in highly-illiquid U.S. pink sheets. The Majorca, Spain-based hedge fund manager is pushing to get approval for a restructuring plan for four of its funds—which will place the illiquid positions into “side pockets” and impose a new one-year lockup—at a shareholder meeting in the Cayman Islands this weekend.

The firm has also agreed to concessions on how it resets its high-water mark for the liquid portions of the restructured funds. Those levels will now be based on the highest of the funds’ valuations on Nov. 1, Dec. 1 and Jan. 1.

“This undertaking is being given in response to investor concerns that the company should not receive a performance fee for the expected rebound in the funds’ portfolio values following the implementation of the restructuring proposals.”

AbCap needs 75% of shareholders to give the OK to its plan this weekend, or the funds in question, which managed about $1.3 billion in July, may be liquidated. Earlier this month, the firm said it had met with about 70% of investors, the overwhelming majority of whom backed the plan. But one shareholder sued, seeking immediate liquidation of two of the funds, and two other sets of investors represented by two different law firms demanded a string of concessions, including increasing the size of permitted redemptions from the fund during its restructuring.

One of the groups, the Absolute Investors Action Group, made up of investors with about $100 million in the four funds, had threatened to vote “no” this weekend, but it was mollified by the firm’s moves.

Meanwhile, today AbCap reopened its German fund, the first of its offerings to begin trading since the troubles began. The firm has replaced the fund’s managers, who resigned earlier this month, with Jens Peters and Antonio Porsia, and will resume calculating net asset value with “immediate effect.”

Investors are expected to yank at least some of their money from the fund, which managed $381 million at the end of August.

AbCap said the fund had just 2% of its assets in illiquid shares, making its resurrection easier than its other offerings. Still, the firm said it is working on reopening its India fund, with the remaining five funds undergoing restructuring.


In Depth

Whisky Business: The Ultimate Liquid Alternative Investment

Sep 15 2014 | 7:02am ET

David Robertson knows his single-malt whisky—he was the Master Distiller at the...

Lifestyle

Hedgies Rock Out For Children's Charity

Sep 15 2014 | 8:40am ET

It's that time of year again—when hedgies trade in their spreadsheets for guitars...

Guest Contributor

Volkered: How Financial Sector Reforms are Creating Opportunities for Hedge Funds

Sep 16 2014 | 11:28am ET

New regulations have dramatically curtailed proprietary trading activity in investment...

 

Editor's Note

    Get A Sneak Peak Of The Alpha Pages

    Aug 25 2014 | 11:21am ET

    As many of you know, FINalternatives was recently acquired by the owners of Futures magazine, a firm called The Alpha Pages LLC. Today marks the soft-launch of a new sister site for both publications. As its name suggests, The Alpha Pages will cover all types of alternative investments, going far beyond the more well-known ones such as hedge funds and private equity. Read more…

 

Futures Magazine

July/August 2014 Cover

In search of the ‘new normal’ at the Fed

The Federal Reserve keeps baby-stepping toward a “normalization” of monetary policy. But just what is normal?

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.